Apple has asked that a class action lawsuit claiming the company conspired with book publishers to raise the price of ebooks be thrown out, stating that the plaintiffs' arguments didn't make sense and that "this allegation just strings together antitrust buzzwords."

According to a report by PaidContent.org, Apple argued "that its business plan was to sell as many e-books as possible and that it had no incentive to raise prices. It also claims that is was a new and inexperienced player in a business in which Amazon dominated with 90 percent marketshare."

The plaintiffs in the case have based their claims largely upon Steve Jobs' comment to Walt Mossberg of the Wall Street Journal, which suggested that publishers "unhappy" with Amazon's efforts to mandate a standard $10 ebook price would likely just withhold their titles from Amazon's store.

Apple's attorneys say Jobs' words were being "mischaracterized" by the plaintiffs, explaining that Jobs simply thought Apple's business strategy was more attractive than Amazon's.

The plaintiffs in the case argue that Apple conspired with publishers to raise the price of ebooks in order to blunt the impact of Amazon's Kindle on the tablet market, something Apple's attorneys described as a nonsensical "Kindle Theory."

This “Kindle theory,” Apple's filing stated, does not "make sense on its own terms. For example, if Amazon was a 'threat' that needed to be squelched by means of an illegal conspiracy, why would Apple offer Amazon’s Kindle app on the iPad?"

The filing further asked, "And why would Apple perceive the need for an illegal solution to the 'Kindle threat' when it had an obvious and lawful one which it implemented – namely, introducing a multipurpose device (the iPad) whose marketing and sales success was not centered on eBook sales?"

Set prices vs the agency model

Apple pioneered the concept of selling digital content at a fixed low price in iTunes with 99 cent songs, followed by similarly low standard pricing of videos and movies, all prices the music labels and studios balked at supporting. Apple has since relaxed its standard pricing to allow publishers to sell their content at variable prices.

In ebooks however, Apple found such resistance for pushing the price of digital titles down to the $9.99 price set by Amazon that it allowed publishers to adopt their own pricing from the start, often closer to $12.99, under a model known as "agency pricing," the same model Amazon uses to sell Android apps.

Under Apple's agency pricing model, publishers selling titles in its iBookstore couldn't also sell their same titles at a lower price elsewhere, another term Amazon similarly sought to use to prevent Android app developers from undercutting its own sales.

Amazon Kindle users and other readers upset by the $2 difference in ebook prices set by Amazon and publishers working with Apple have asked the US Department of Justice to get involved, which has announced plans to sue Apple and book publishers Simon &amp; Schuster, Hachette, Penguin, Macmillan and HarperCollins over the Kindle Theory conspiracy.

I am wondering if this was bought to the justice's attention by someone who might have some skin in the game. Like a dominant player that had to completely change their deals once Apple entered the field.

I'm not one to defend Apple in all circumstances -- I think they do plenty wrong. But they're not wrong in this case. You might not like the Agency model, but it's perfectly legitimate.

However, what really makes no sense in terms of the Dept of Justice going after Apple on this is that the Supreme Court ruled several years ago that manufacturers can not only enforce minimum advertised prices, but also enforce minimum selling prices (even though I personally disagree with that decision). (And in recent weeks, all of the major electronics manufacturers have announced their intention to do so on the upper-line products.) So the Agency Model is only slightly different: the publisher is setting THE price. But since no one ever sells for more than list price, it's a moot point: effectively, they're both the same.

Furthermore, when a company like Amazon sells products at a loss in order to gain market share, that used to be called predatory pricing. I don't know whether it's still illegal but you used to be able to get sued over it. So the DOJ might actually be going after the wrong party.

So it seems to me that if the DOJ thinks Apple has done something wrong, it's really Agency Model pricing that they don't like and if that's the case, then Congress should make the Agency Model illegal and pass new legislation that will pass constitutional muster eliminating the right of manufacturers to set minimum prices.

The plaintiffs in the case argue that Apple conspired with publishers to raise the price of ebooks in order to blunt the impact of Amazon's Kindle on the tablet market, something Apple's attorneys described as a nonsensical "Kindle Theory."

This Kindle theory, Apple's filing stated, does not "make sense on its own terms. For example, if Amazon was a 'threat' that needed to be squelched by means of an illegal conspiracy, why would Apple offer Amazons Kindle app on the iPad?"

I don't think this defense is going to fly. The alleged conspiracy was to make ebooks the same price across the board. When all ebook prices are identical, the Kindle app on the iPad would actually make the iPad more desirable and the Kindle less desirable. There would be no pricing benefits of the content on the Kindle, so why buy a Kindle when you can do what the Kindle can on an iPad, which has more features? The cost of the unit then becomes the consumer's major concern.

The loss leader strategy appears to have buoyed Kindle sales. The short-term impact of raising prices may have increased Amazon profits, but the loss in market-share of the Kindle, if demonstrable and relevant, may render moot the defense's point.

Quote:

The filing further asked, "And why would Apple perceive the need for an illegal solution to the 'Kindle threat' when it had an obvious and lawful one which it implemented namely, introducing a multipurpose device (the iPad) whose marketing and sales success was not centered on eBook sales?"

And this is the million dollar question (but you the affected party, as in all class-action lawsuits, will only receive a coupon for 10% off your next ebook purchase).

This lawsuit will boil down to one simple question. Did Apple conspire with the publishers, by putting them all on the same page, in order to implement a sweeping change in the way ebooks are priced by all companies, e.g., the agency model? If the plaintiff can show this, the motivations of Apple--or inanity thereof--will not matter.

Unfortunately for the defense, the DOJ and European Regulators are also investigating these claims of collusion. The Plaintiffs in this lawsuit may potentially receive access to records and files that are not typically available in these types of lawsuits.

My prediction: Expect to see Apple and the Publishers settle on the DOJ and EU complaints. This will deprive the class-action plaintiffs of extra evidence, thus also reaching a settlement. The agency model will become more limited in scope, perhaps allowing retailers leeway on their profit margins, i.e., the publisher will set an MSRP and receive the 70% of that price, but the retailer can lower the retail price by cutting down their 30%.

All this from the idiots that brought us fast and furious gun running, 500 million in wasted Solyndra cash and government healthcare. Concentrate on managing the government not screwing over one of the few premier businesses left that are born and bred in the USA. Leave Apple alone and try managing the country.

So then I wonder why there hasn't been similar scrutiny of the one-size-fits-all pricing for music? Seems very similar, did Apple conspire with the music labels to set prices? Or movie and TV show rentals and purchases-- are those prices the result of Apple colluding with the studios?

It's part of Apple's business model to offer content in the iTunes store at a fixed price per category, with slight variations. They've long insisted that it results in a better customer experience if a given price is "the" price of a given piece of content. I'm not seeing what makes eBooks so different/illegal, and if they are why I haven't heard anyone alleging that the prior deals were suspect. I'd be interested in knowing what's unique about books.

They spoke of the sayings and doings of their commander, the grand duke, and told stories of his kindness and irascibility.

What Apple despised 30 years ago was shoddy design and poor user experiences, just like now. They used the IBM/rebel hook because caring about things like typography, WYSIWYG displays, ease of use, elegance, new possibilities for computing platforms, etc. were values that didn't really obtain in the PC market, which treated computers as inflexible tools towards a dreary end.

Imagining that that somehow meant Apple was comprised of a bunch of hippies that didn't care if they turned a profit or not, or who didn't have a business plan and didn't bother with money making ventures is delusional (although I realize you don't really care and are just casually concern trolling).

They spoke of the sayings and doings of their commander, the grand duke, and told stories of his kindness and irascibility.

So then I wonder why there hasn't been similar scrutiny of the one-size-fits-all pricing for music? Seems very similar, did Apple conspire with the music labels to set prices? Or movie and TV show rentals and purchases-- are those prices the result of Apple colluding with the studios?

It's part of Apple's business model to offer content in the iTunes store at a fixed price per category, with slight variations. They've long insisted that it results in a better customer experience if a given price is "the" price of a given piece of content. I'm not seeing what makes eBooks so different/illegal, and if they are why I haven't heard anyone alleging that the prior deals were suspect. I'd be interested in knowing what's unique about books.

There was scrutiny of iTunes pricing. They reduced prices in the UK to avoid potential charges from EU regulators. There were even antitrust charges filed in California. With Apple even richer, powerful and more dominating a force now the questions are going to get tougher IMO. What they could slide by with a few years ago may not fly in new segments of the market.

There was scrutiny of iTunes pricing. They reduced prices in the UK to avoid potential charges from EU regulators. There were even antitrust charges filed in California. With Apple even richer, powerful and more dominating a force now the questions are going to get tougher IMO. What they could slide by with a few years ago may not fly in new segments of the market.

The thing you're linking to doesn't have anything to do with fixed pricing-- it involved allegations that Apple was using it's near monopoly position in digital music downloads to unfairly limit consumer choice by locking its software to the iPod. Since they've subsequently abandoned DRM (and anyone can license AAC for their digital music player) this complaint is moot. It also doesn't really speak to Apple's intentions, since Apple themselves were an early critic of (studio mandated) DRM and were arguable instrumental in moving the industry past those limitations.

The mandated price lowering in the UK is also a bit ironic, since the music labels big complaint with iTunes pricing was that it was too low.

At any rate, none of that has anything to do with price fixing. So again I ask: if other media on iTunes can legitimately be sold at a flat rate per category, why is doing that with eBooks a conspiracy?

They spoke of the sayings and doings of their commander, the grand duke, and told stories of his kindness and irascibility.

The thing you're linking to doesn't have anything to do with fixed pricing-- it involved allegations that Apple was using it's near monopoly position in digital music downloads to unfairly limit consumer choice by locking its software to the iPod. Since they've subsequently abandoned DRM (and anyone can license AAC for their digital music player) this complaint is moot. It also doesn't really speak to Apple's intentions, since Apple themselves were an early critic of (studio mandated) DRM and were arguable instrumental in moving the industry past those limitations.

The mandated price lowering in the UK is also a bit ironic, since the music labels big complaint with iTunes pricing was that it was too low.

At any rate, none of that has anything to do with price fixing. So again I ask: if other media on iTunes can legitimately be sold at a flat rate per category, why is doing that with eBooks a conspiracy?

That's how Gatorguy works. He do a google search about the subject and he links to the the first search results without even reading the article he links to. Just give it a try. Type "Apple iTunes Music Antitrust" in google and look at the first link

There was scrutiny of iTunes pricing. They reduced prices in the UK to avoid potential charges from EU regulators. There were even antitrust charges filed in California. With Apple even richer, powerful and more dominating a force now the questions are going to get tougher IMO. What they could slide by with a few years ago may not fly in new segments of the market.

It also has much to do with how technology has changed the way antitrust and anti-competition regulations are enforced. Certain practices used by technology companies are almost fruitless to pursue in court. Competition is so quick to change in this digital age that by the time anyone has a case, something new has come along that has replaced the ability of said company to exploit the aforementioned advantage.

The government antitrust regulators have practically narrowed their scope to one question, which they can pursue: did the actions of said company affect the consumer in a negative way? (higher prices are usually the smoking gun).

The thing you're linking to doesn't have anything to do with fixed pricing-- it involved allegations that Apple was using it's near monopoly position in digital music downloads to unfairly limit consumer choice by locking its software to the iPod.

The mandated price lowering in the UK is also a bit ironic, since the music labels big complaint with iTunes pricing was that it was too low.

At any rate, none of that has anything to do with price fixing.

If it had nothing to do with UK iTunes pricing it's odd that price adjustments were offered by Apple to avoid possible EU charges. I'm sure you know the reasons better than I do so my apologies for offering it as an example of pricing scrutiny. Agreed that the California antitrust case wasn't specifically over prices and thus isn't what you were asking about.

EDIT: a bit of research explained the UK price issue. Attached to the EU statement was this tho, which might give you a comparison showing why the books sales issue might get their attention more than songs did:

"The Commission was satisfied that the price differential was not the result of collusion between Apple and the record companies. The probe "allowed the Commission to clarify that there is no agreement between Apple and the major record companies regarding how the iTunes store is organized in Europe. Rather, the structure of the iTunes store is chosen by Apple to take into account the country-specific aspects of copyright laws," the Commission said.

At any rate, none of that has anything to do with price fixing. So again I ask: if other media on iTunes can legitimately be sold at a flat rate per category, why is doing that with eBooks a conspiracy?

The way the allegations are being made, this is the issue (these are all allegations, not facts, so take them as such).

Amazon used to purchase the rights to sell ebooks. Example: a publisher set a wholesale price at $12 and Amazon set the retail price at $10. The publisher received $12 no matter what Amazon sold the title for. Publishers disliked that Amazon was selling their titles at a discounted rate. The suggested reasons are many, but probably not relevant to what you are asking.

A publisher by itself could not make Amazon change this practice of selling titles at a discounted rate. Amazon is a huge market, and if a publisher alone threatens to pull its titles if Amazon does not comply, Amazon may call the bluff and said publisher takes a huge financial hit.

Now, get all these publishers in a room and get them to agree to make the same threat as a group, then you have collusion. Price-fixing is probably too specific in this case. However, the end result was higher ebook prices. If those prices are demonstrable as a result of this collusion, there is a case here.

If it had nothing to do with UK iTunes pricing it's odd that price adjustments were offered by Apple to avoid possible EU charges. I'm sure you know the reasons better than I do so my apologies for offering it as an example of pricing scrutiny. Agreed that the California antitrust case wasn't specifically over prices and thus isn't what you were asking about.

You lost me.

Where is the proof there is causation?

How does anything happing in the EU affect iTunes Store prices in the US?

iTunes Store for music has variable pricing. As I recall this was established when they finally got the labels to finally agree to higher bitrate and DRM-free content. Something they were offering to Amazon long before. How is this different than the variable pricing that publishers can offer for books on iBookstore?

This bot has been removed from circulation due to a malfunctioning morality chip.

Apple has billions to spend on the best lawyers. It would not be engaged in any antitrust activity with their advice.

Realize that Apple cannot be sued on antitrust grounds in any market because it doesn't have a monopoly in any market.

In books, an antitrust argument is going to be even more ridiculous.

Amazon is the HUGE 800 POUND BOOK SELLING GORILLA. It sells books AT A LOST - something Microsoft was accused of doing.

Apple has a small minority share in the bookselling market.

Any talk of antitrust against Apple in this market is simply not going to fly.

Antitrust regulations are neither limited to monopolies nor based upon marketshare. Antitrust covers anti-competitive practices, collusion being one such facet. Monopolization of a market falls under antitrust, not vice versa.

Judicial interpretations of the Sherman (Antitrust) Act have long penalized businesses that engage in price fixing, no monopoly needed. The link I gave you is a really easy read, generally in layman's terms.

Judicial interpretations of the Sherman (Antitrust) Act have long penalized businesses that engage in price fixing, no monopoly needed. The link I gave you is a really easy read, generally in layman's terms.

So why is Apple responsible for what the publishers do if the publishers got together and agreed to on price fixing?

So why is Apple responsible for what the publishers do if the publishers got together and agreed to on price fixing?

If it brought all the actors together, then it is party to the collusion.

However, any damages levied on Apple will likely just be fines, probably in the low single millions range. They probably won't fight this too hard. To them, the worse that happens is they have to drop the agency model.

So why is Apple responsible for what the publishers do if the publishers got together and agreed to on price fixing?

The allegation is that Apple representatives, perhaps Steve Jobs himself, met with a select group of publisher's to come to an agreement on fixed pricing(Steve Jobs admits to that in his biography). In essence there is the idea that Apple made the arrangements, brought each of the parties together on an agreement to set pricing and gave them a market to force the issue.

There's been no determination that it's all true, but the DoJ apparently is convinced enough to warn Apple and 5 involved publishers that it's time to negotiate a settlement or face a Federal antitrust suit. According to reports there are some number of the parties, so far unidentified, that are willing to do just that.

There's of course several sides to most stories and at least a couple of the publishers are going for "hearts and minds" as one put it, trying to convince the buying public they really had consumer' best interests in mind. They also plan to resist settling so as not to upset the business model Apple-cart. http://www.ft.com/cms/s/0/41d51ac6-6...#axzz1oaaHTPHL

Amazon is the HUGE 800 POUND BOOK SELLING GORILLA. It sells books AT A LOST - something Microsoft was accused of doing.

It sells books on an island inhabited by an over-hyped TV show?

Also, if Amazon is selling their hardware at a loss and expecting to make the money up in their store and then selling their STORE content at a loss, wouldn't that raise at least one red flag somewhere?

It also has much to do with how technology has changed the way antitrust and anti-competition regulations are enforced. Certain practices used by technology companies are almost fruitless to pursue in court. Competition is so quick to change in this digital age that by the time anyone has a case, something new has come along that has replaced the ability of said company to exploit the aforementioned advantage.

The government antitrust regulators have practically narrowed their scope to one question, which they can pursue: did the actions of said company affect the consumer in a negative way? (higher prices are usually the smoking gun).

True. However you can have higher prices as long as it also has value and innovation. That's why Apple commands the high end of the market. The problem of all the lawsuits, and those who bring them, boils down mostly to envy. Some people are envious of those who succeed, so they try to take success down. That's why envy is one of the seven deadly sins. (btw: I'm not religious... so I'm just saying)

Also, if Amazon is selling their hardware at a loss and expecting to make the money up in their store and then selling their STORE content at a loss, wouldn't that raise at least one red flag somewhere?

Absolutely. Predatory pricing. But that's also one of the hardest antitrust claims to support.

It's hard to sustain. It's also one of the easiest anti-competitive practices to combat (if it is unilateral, which in Amazon's case, it was).

I wonder why the publishers simply didn't purchase the titles Amazon sold at a loss. They were digital formats, so the publishers could have bought them from now until the end of eternity, turning Amazon's loss into their profit.

True. However you can have higher prices as long as it also has value and innovation. That's why Apple commands the high end of the market. The problem of all the lawsuits, and those who bring them, boils down mostly to envy. Some people are envious of those who succeed, so they try to take success down. That's why envy is one of the seven deadly sins. (btw: I'm not religious... so I'm just saying)

I'll partially disagree with you on envy being the driving force behind this class-action lawsuit, as I would with any class-action lawsuit.

Envy may have brought forth the original claimants, but the money aspect for the lawyers is what drives these monsters. Successful class-action lawsuits have retired many a litigator, while the actual victims get a coupon for a $1 off their next Big Mac meal.

I'll partially disagree with you on envy being the driving force behind this class-action lawsuit, as I would with any class-action lawsuit.

Envy may have brought forth the original claimants, but the money aspect for the lawyers is what drives these monsters. Successful class-action lawsuits have retired many a litigator, while the actual victims get a coupon for a $1 off their next Big Mac meal.

I don't think this defense is going to fly. The alleged conspiracy was to make ebooks the same price across the board. When all ebook prices are identical, the Kindle app on the iPad would actually make the iPad more desirable and the Kindle less desirable. There would be no pricing benefits of the content on the Kindle, so why buy a Kindle when you can do what the Kindle can on an iPad, which has more features? The cost of the unit then becomes the consumer's major concern.

That would be a concern if Amazon sold the Kindle for a profit. They sell it essentially for cost and make their money on content. The Kindle App and Kindle ecosystem can still compete on the depth of its content.

Quote:

Originally Posted by ALNorm

The loss leader strategy appears to have buoyed Kindle sales. The short-term impact of raising prices may have increased Amazon profits, but the loss in market-share of the Kindle, if demonstrable and relevant, may render moot the defense's point.

Except that Amazon has the dominant market position. Antitrust law is somewhat shaky, but I don't think it exists for the benefit of the dominant players in a market.

Quote:

Originally Posted by ALNorm

This lawsuit will boil down to one simple question. Did Apple conspire with the publishers, by putting them all on the same page, in order to implement a sweeping change in the way ebooks are priced by all companies, e.g., the agency model? If the plaintiff can show this, the motivations of Apple--or inanity thereof--will not matter.

The agency model itself is pretty common. Amazon uses it in other services, as the article points out. Proving that Apple attempted to build up its own bookstore by getting publishers to accept an agency model is not the same as proving that Apple engaged in price fixing.

Quote:

Originally Posted by ALNorm

Unfortunately for the defense, the DOJ and European Regulators are also investigating these claims of collusion. The Plaintiffs in this lawsuit may potentially receive access to records and files that are not typically available in these types of lawsuits.

And this is a big reason why I don't like antitrust law. I didn't like it when the DOJ and EU went after Microsoft over bundling of Internet Explorer, and I don't like the DOJ and EU going after Apple now.

On top of that, antitrust action is usually ineffective at accomplishing its intended goal, and often attacks the "wrong" issues. In the end, Netscape lost out, and Microsoft also continued to bundle Windows Media Player with Windows. That didn't prevent Chrome from being developed, nor did it prevent Apple from achieving dominance with iTunes (and I don't think it's because the EU forced Microsoft to sell Windows XP/Vista/7 "N" editions).

Quote:

Originally Posted by ALNorm

My prediction: Expect to see Apple and the Publishers settle on the DOJ and EU complaints. This will deprive the class-action plaintiffs of extra evidence, thus also reaching a settlement. The agency model will become more limited in scope, perhaps allowing retailers leeway on their profit margins, i.e., the publisher will set an MSRP and receive the 70% of that price, but the retailer can lower the retail price by cutting down their 30%.

It depends on how important this is to Apple and the publishers. My guess is it will mean more to the publishers than Apple as far as actual book sales are concerned, but Apple will defend it vigorously if it sees a DOJ or EU settlement as a "back door" to a subsequent action against its App Store model, since the latter is key to its strategy for selling iPhones and iPads.

The allegation is that Apple representatives, perhaps Steve Jobs himself, met with a select group of publisher's to come to an agreement on fixed pricing(Steve Jobs admits to that in his biography). In essence there is the idea that Apple made the arrangements, brought each of the parties together on an agreement to set pricing and gave them a market to force the issue.

SJ did not admit on price fixing. His statement was no where near admission of price fixing. He basically said Apple don't care how much your charge as long as we get our 30%. How is that price fixing? :roll eyes:

Quote:

There's been no determination that it's all true, but the DoJ apparently is convinced enough to warn Apple and 5 involved publishers that it's time to negotiate a settlement or face a Federal antitrust suit. According to reports there are some number of the parties, so far unidentified, that are willing to do just that.

There's of course several sides to most stories and at least a couple of the publishers are going for "hearts and minds" as one put it, trying to convince the buying public they really had consumer' best interests in mind. They also plan to resist settling so as not to upset the business model Apple-cart. http://www.ft.com/cms/s/0/41d51ac6-6...#axzz1oaaHTPHL

These are claims. No one knows what the DoJ is doing. All the talk is about publishers negotiating for settlement and the DoJ "suspecting" not convinced.